American Axle cites bankruptcy risk after deep loss

By IBT Staff Reporter On 08/05/09 AT 1:16 PM

American Axle & Manufacturing Holdings Inc reported a bigger-than-expected quarterly loss on Wednesday due to steep production cuts by automakers and said it remained uncertain whether it could complete a debt restructuring outside of bankruptcy.

Shares of the auto parts supplier were up more than 9 percent in morning trading after falling as much as 13 percent.

American Axle, which relies on GM for about three-quarters of its sales, said it was working with key stakeholders on amendments to existing credit agreements and other financing arrangements in an effort to restructure its balance sheet outside of bankruptcy.

American Axle's primary objective is to complete its restructuring outside of a bankruptcy process, the company said in a filing with the U.S. Securities and Exchange Commission after reporting second-quarter results.

However, there can be no assurance that we will be successful in reaching agreements with these parties and avoid filing for bankruptcy, American Axle said.

American Axle's agreement with lenders that waives covenants under its credit facility expires on August 20.

The company, like other U.S. auto parts suppliers, has been hit hard by production shutdowns at General Motors Co and Chrysler Group LLC associated with the automakers' bankruptcy restructurings.

Analysts have said American Axle is at risk of joining other major parts makers such as Lear Corp and Visteon in bankruptcy.

Two people familiar with the matter told Reuters earlier in July that American Axle had been working with legal advisers, including law firm Shearman & Sterling, as it considers restructuring options, including bankruptcy.

The second-quarter net loss narrowed to $288.6 million, or $5.20 per share, from $644.3 million, or $11.89 per share, a year earlier.

The results included $3.46 per share in one-time charges, mostly for asset impairments and workforce reductions, the company said.

Excluding the charges, American Axle lost $1.74 per share. On that basis, analysts on average had expected a loss of 77 cents, according to Reuters Estimates.

Sales fell to $245.6 million from $490.5 million.

American Axle said the extensive shutdowns by GM and Chrysler accounted for $203.6 million in revenue declines.

GM emerged from bankruptcy on July 10 by selling most of its assets to a group funded by the U.S. Treasury. Chrysler also exited a two-month bankruptcy in early June by completing a similar sale to a new company led by Fiat SpA .

American Axle is a critical parts supplier to GM, producing axles for its full-sized pickups and SUVs, two areas where sharp production cutbacks by the automaker have applied severe pressure to parts companies.

Shares of American Axle were up 9.2 percent at $2.85 on the New York Stock Exchange after falling as low as $2.26 earlier in the session.